This article originally ran on January 29, but must be circulating again in March because we’re getting questions from readers — so we re-share it with you today.
In case you’re wondering, this “value” stock is now about 25% lower than it was when this article first hit our pages (and the ad first hit my inbox), thanks to low comparable store sales and a weak forecast from the company when they released earnings a couple weeks ago. So… if you thought it was a value at $63, you might be extra-enthused with it at $46. The forward PE is now down just a whisker below 10. I haven’t looked at the latest financials or the quarterly update in any detail.
So, without further ado, our article and comments from back in January:
I don’t think I’ve covered a Hilary Kramer pitch recently, the last one that really got the attention of Gumshoe readers was her endless promotion of GW Pharmaceuticals (GWPH) as the “Microsoft of Medical Marijuana”… but now she’s out with some ads touting value stocks and her newer advisory called Value Authority, which I’ve never seen advertised before, so we’re going to jump on that and see what we can find.
(She does, incidentally, still like GWPH.)
So what is this “Number 1 Value stock for 2018” that she’s trumpeting now? One of the great benefits of having multiple newsletters with different focus is that you get to be right almost no matter what, so we should take with some bit of skepticism her big picture prognostications (as, of course, you should be skeptical of mine) — but, prepared to be skeptical, this is what she says:
“… let me explain why 2018 will be a great year for our value stocks.
“With the stock market at all-time highs, stocks have rarely been this expensive. According to Goldman Sachs, stocks have been more expensive only 11% of the time over the past 40 years.
“It’s no wonder.
“In just 12 months the Dow has jumped from 19,827 to over 26,000—the fastest rise on record!
“With unemployment at just 4.2%, inflation virtually nonexistent, and the U.S. tax cuts about to put billions of dollars back into American wallets and corporate coffers, the market has even more room to grow, too.
“But the big money won’t be made in growth stocks; instead, it will be in a number of select value plays.”
“Value” and “Growth” are overused terms that don’t necessarily mean anything — but in common investor parlance we usually think of value stocks as being companies that are valued primarily based on their actual assets and current earnings power, and often trading at below-average valuations based on those numbers — and of growth stocks as being companies that are valued primarily based on how much growth investors see in their future, how much we anticipate those earnings growing in the next few years, while they trade at a premium valuation to the market based on their current earnings or assets.
There’s no hard and fast rule about what “value” means, and you could easily come up with a few stocks that the value and growth camps both claim as their own, but, well, we’re human beings and we like to categorize things and take sides, so step up, place your bets! Who’s gonna win, value or growth?!
But anyway, what we’re interested in is Kramer’s pitch about her favorite value stock… which, we’re told, is trading at a super-cheap valuation and also growing like crazy. Here are the clues we get:
“Why My No. 1 Value Stock Could Triple Weight Watchers’ 389% Gains Last Year
“Just like Weight Watchers, this company is also riding the wave of unstoppable earnings growth.
“But unlike Weight Watchers, which profits in the diet sector, this company is making money hand over fist in the discount retail sector.
“This is why the world’s biggest institutional investors have been adding it to their holdings—and for one good reason.
“The retail apocalypse has been very, very good for it.”
She goes on to note that discounters are not suffering to the same extent as department stores when it comes to the “retail apocalypse”, and that’s generally true… the dollar stores and convenience stores and even fashion discounters have been leading the charge when it comes to store openings and excitement in retail, even as the far larger JC Penneys and Sears stores get shuttered.
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